Re-thinking and Re-claiming “Tail Spend” [PRO]

The idea of “tail spend” doesn’t seem very complicated at first. Run a pareto analysis on your spend categories and suppliers to make a cut off at, say, the 80% that represent only 20% of your spend. Your numbers will of course vary, but the idea is to find a way to better manage such “nuisance” low-dollar spend that doesn’t detract from your efficiency, or worse yet, from spending time managing the truly strategic spend categories more deeply. You might think of this as the spend in the lower-left quadrant of the famous Krajlic 2×2 matrix, which describes a strategy of “purchasing management” to manage non-critical, abundant supply that can be sourced locally in a de-centralized manner for maximum efficiency. And, maybe, if you manage this nuisance spend properly, you can even extract some value from it (e.g., a “quick source” process to gain some speedy spend savings). Sounds straightforward, right? Well, it’s not, and I have purposefully led you astray to prove a point.

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